The Washington State Attorney General has initiated legal action against Kalshi, a prediction markets provider, alleging that the company is offering gambling products in violation of state laws. The lawsuit, filed on Friday, claims that Kalshi’s operations circumvent Washington’s stringent gambling regulations, which include a prohibition on online gambling.
According to the complaint, Kalshi’s platform allows users to wager on various events, displaying odds that determine potential payouts, similar to traditional sportsbooks. A press release from the state noted, “Kalshi advertises that they allow consumers to ‘bet on anything’ by simply calling their service a ‘prediction market’ rather than ‘gambling.'” This distinction, the state argues, does not exempt Kalshi from existing gambling laws.
The lawsuit further contends that Kalshi’s marketing materials reference “legal betting” and asserts that the company’s activities align with state definitions of gambling, professional gambling, and bookmaking. Additionally, the complaint raises concerns about the potential for promoting gambling addiction, particularly among college students.
In response, Kalshi has sought to transfer the case to federal court, citing ongoing litigation on similar matters in other federal jurisdictions. The company stated it had not received prior notice or engagement from Washington before the lawsuit was filed.
This legal action is part of a broader trend of state-level scrutiny of prediction market providers. Advocates for these companies, including Commodity Futures Trading Commission Chair Mike Selig, argue that they operate under federal regulations governing derivatives contracts. However, state officials maintain that these services are effectively gambling products and should be regulated accordingly.
In a related development, Nevada recently secured a court ruling permitting it to impose a temporary restraining order against Kalshi, which requires the removal of its sports, entertainment, and election contracts from the state for at least two weeks. A court hearing is scheduled for April 3 to determine whether this restriction will be extended.
Despite the temporary order, reports indicate that Kalshi’s platform remained accessible to users in Nevada. Additionally, a preliminary injunction was issued against Coinbase, which partners with Kalshi, mandating the suspension of its prediction market offerings in Nevada until further court proceedings are completed.
Both Washington and Nevada’s federal district courts fall under the jurisdiction of the Ninth Circuit Court of Appeals, suggesting that the outcomes of these cases may have implications beyond their respective states.
Washington State has filed a lawsuit against Kalshi, alleging violations of gambling laws as the company operates prediction markets that resemble gambling products. This action follows a similar legal trend in Nevada, raising questions about the regulatory landscape for prediction markets in the U.S.